Taxes

Who Paid the Most?

An article in the New York Times for May 21, 1992 asks the question, "Who paid the most taxes in the 80's?" and then answers with "The superrich."

To answer such a question, it is necessary to define the players, especially, the superrich. The article says the top 1% reaped 70% of the growth of the 80s but also shouldered the largest share of the taxes. The basis of the statement was that all American families paid 45.2 billion more in taxes in 1988 than in 1980, but the top 1% paid 50.2 billion more. Nowhere in the article does it say how much each of the groups paid in absolute terms, like dollars, but shows the number as percentages.

Before we look at the percentages, it is important to look at some of the characteristics of the rich. We will probably never have truly adequate definitions, but we certainly have to do better than say that the top 1% or the top 10% or those who make more than 310,000 dollars a year are the rich.

An article in Business Week for May 18, 1992, titled "Would the Economy Gain From Spreading Inherited Wealth?" stated that the top 1% of the nation's families, (fewer than 1,000,000 families), increased their net wealth 5%—from 31.3% in 1983 to 36.2% in 1982: The net worth of this group was 6.14 trillion dollars and was 20% higher than the entire net worth of the bottom 90% of the families.

The article goes on to say that America's truly wealthy elite, defined as the 1/2 of 1% of all households, (fewer than 500,000 families), got all the gains while the wealth of the 1/2% immediately beneath them did not change. In 1983 the top 1/2% owned 24.1% of all household wealth, but in 1989 that total had increased to 29.1%. Their net worth in 1983 was 5.86 million and in 1989 it was 10.3 million. The analysis is still murky for while 10.3 million dollars is a handsome amount of money and enough to live quite comfortably on for all of a lifetime, it is far from characteristic of wealth at the very top.

The BusinessWeek article goes on to say that these analyses did not look closer at the top .5% of the families, but that Sidney Carroll, economist at the University of Tennessee, has said that it's the people at the very top of the top 1%—people with wealth in the hundreds of millions of dollars——whose fortunes seem to have soared in the 1980's.

It seems that the United States has a propertied oligarchy whose huge wealth is so, concentrated that it soon averages, out to modest proportions if the number of families is averaged over the top 1% of the population, and may even be obscured in the top half per cent While my estimate is idle speculation since I have no data, the top elite of the United States may be in the category of 50,000 or fewer families, rather than the 500,000 or fewer families in the top 1/2%. It's a lead pipe cinch that families who make $310,000 a year are not super rich.

We should probably classify people into four classes: those who must work to sustain a middle class standard of living; those who do not have to work to maintain a middle class standard of living; and those who do not have a middle class standard of living regardless of whether they work or not. (Middle class is here defined as the economic class of people who own a home and car, who have the resources to send children to college, and who have retirement income and modest savings.) Ability to send children to college is the key factor in the self-replicating system called the middle class.

It is necessary to divide the "upper class," the group that doesn't have to work to sustain a middle class life style, into two parts, the rich and the superrich, as there exists an important distinction between the two: the top 1/2% got 70% of the new wealth of the 80's with only a 1.8% increase their taxes, while those who were merely rich enjoyed no such windfall. Everyone else took a hit.

Inherited wealth is usually the only key to membership in the superrich class, although a Bill Gates comes along once in a while. The Bill Gates' of the world, however, could not sustain the class. It takes inherited wealth to do that. If you are not now superrich, it is very unlikely that you, your children, or grandchildren will become so.

Getting back to taxes: In 1989; the top 1% paid 15.4% of the taxes; the bottom 40% paid 7.9% of the taxes; and the group in the middle paid the 76.7% portion. In 1977, the top 1% paid 13.6.% and eleven years later, in 1988 they paid 15.4%——an increase of 1.8%. But in the same interval they got 70% of the new revenue. Not bad, getting a 1.8% tax increase on 70% more income. And remember, the top 1% didn't get the 70% increase; only the top 1/2% of that 1% got it, while the next 1/2% got nothing. The enormity of these figures is illustrated by the fact that, despite their taxes being lowered, these people made so much money that they paid more taxes.

There is no doubt that the present tax code is a cash transfer program, benefiting only a relatively few families at the very top; and that the amounts transferred dwarf the entire social welfare system's amount that supports perhaps 20,000,000 families. The rich but not superrich, and the middle class get the short end of the stick, as they get to pay 76.7% of the tab.

The superrich put in their thumbs and pulled out plums. Everybody else got crumbs or lost money, AND got to pick up the major share of the taxes—the rich and middle class at 76.7% and the poor (40% of all families) at 7.9% for a total of 84.6% of the tax. Ronald Reagan took government off the backs of people and gave the money to the superrich, while saddling those people now relieved of government with 85% of the tax burden. He communicated the socks off the lower, middle, and upper classes without taking off their shoes.

Ecologically we should not be concerned with the old wealth. Our concern should be with ecological equity with regards to the new wealth. We see in the case presented here about taxes that the superrich not only maintained their position but enhanced it at a terrible cost——the loss of normal social functioning in the rest of our society. A departure from progressive taxation and a deliberate incumbrance of enormous debt turned out to be a windfall for the superrich. It is inequitable ecologically, morally, and ethically. When we ponder the facts that (1) taxes were raised and spending was increased in order to incur national debt so it could be said that this country has no money for social programs, and that (2) the money spent to incur the debt actually ended up benefiting the superrich to the exclusion of all others, we may strongly wish to consider whether the acts were criminally immoral.

Ecological equity as a guiding principle says to each generation, "Here are the tools (the unalienable rights) to fashion the good life for yourself and your family." Operated on this principle, government shows no favoritism, class bias, or discrimination. It is up to individuals with their family's help to get education and other skills to make their way in our social and economic world. But when a government intentionally tilts the playing field so that millions of players fall off the board, it is time for a new government—or a new form of government, as promised in the Declaration of Independence—that does not divide the citizens-sovereign into discordant factions, and does not run the government for the wealthy few; a government that represents the citizens-sovereign, not the money interests of those at the top.

In a democratic republic, the wealthy have all the advantages that economics can bestow upon them. This class of people does not need tax advantages that diminish the prospects for the classes beneath it in order to survive and prosper.

It goes without saying that the superrich are also citizens-sovereign with their unalienable rights. The rich and the superrich have every right to their wealth, as much so, as they have to their unalienable rights. That's what life in a republic is all about. When it comes to government they have the right to one-person-one vote. The voting revolution of the 1960's gave one-person-one-vote to rural America; it is now time to pass this benefit on to the rich and the superrich.

Taxes are what, we pay for a humane ecosystem. All citizens sovereign must pay their fair share.

...Ted Sudia...

Massive Malfeasance

Let's Hear it for the Looters

The Savings & Loan (S&L) scandal happened because the bank regulators took a hike. While the white collar criminal element of the United States was busy looting the banks, the top regulators and the top banking people in the congress didn't want to hear anything about it. To my knowledge, no regulator or government official responsible for malfeasance, misfeasance, or nonfeasance in office was ever brought to task for the massive theft of assets in the banks. Not to worry: the stolen assets were insured. Who was the insurance company? The U.S. taxpayer, that is; the "little people (who) pay taxes," as put by one very rich lady.

The stealing was on such a massive scale that one has to paraphrase Joseph Stalin to get a feel for what happened. Stalin once said, "The death of one man is a tragedy. The death of millions is statistics." Robbing one bank is a crime, robbing a thousand banks is statistics. The robber of one bank will be relentlessly pursued by the FBI, the Secret Service, and State and local law enforcement officers. No stone will be left unturned to catch the robber. However, the robbery and looting of the, S&Ls has produced nothing more than a ho hum attitude among law enforcement officers. Only one or two bankers have been prosecuted, and these only because there is political gain to be made from it, as in the case of the Keating Five. To actually go out and round up the white collar criminals involved seems to be too much to expect from our government.

The agencies of government responsible for the debacle were abolished and the Resolution Trust Corporation (RTC) was established to receive the assets of failed banks and to resolve the issue on a case-by-case basis. My own bank in Washington, D.C. went belly up and was sold, in pieces. The RTC has my mortgage and the Crestar Banking company bought my savings account. Actually they bought the branches of the Perpetual FSB and my saving account went with it. They promptly abolished my telephone bill payer service and closed the ATM in my grocery store. I am now with the Chevy Chase FSB which has home banking by computer and is putting the ATM back in my grocery store.

As in the case of many other crimes, indicting individuals for looting S&Ls has a statute of limitations. Many of the criminals may go free for lack of prosecution if the RTC fails to bring the indictments and get the cases into court in time. Would anybody be really surprised to know that the top brass of the RTC is reorganizing and downsizing the law division responsible for bringing the indictments of these robbers of our national worth, people who stole as much money as the drug people make?

"RTC sources said new lawyers with limited or no experience in the area are being hired to take the places of those pushed out. RTC sources described the departures as a sudden brain drain, and some law suits won't get filed before the statutes of limitation run out," says The Washington Post of June 4, 1992. "We thought we were hired to accomplish a mission of national significance," said one lawyer. "We've been hampered every step of the way, and just when we started filing cases, they tell us we're losing our jobs," Again a quotation from the Washington Post for June 4, 1992.

At stake in this bureaucratic mish mash are 176 cases ready to go to court and 465 more in preparation. The first banks were closed in 1989, the statute is for three years, and cases are expiring on a daily basis because of the statute of limitations. At least 200 institutions closed in 1989 the investigative reporters? Why are the leaders of the RTC not household names in the USA? Why doesn't anybody care? Is it because it's just tax money, and anyone knows that tax money is an externality, like water or air? It doesn't come from any place and it doesn't go any where. It's just some numbers in books. (Well, think that if you like.)

In a republic where the elected representatives of the people represented the people, all hell would be breaking loose in the RTC. But in a republic where the people's elected representatives represent the PACS, many of which are funded by the banking industry, it's ho hum time again in the Executive Branch, particularly since it is an election year.

...Ted Sudia...

© Copyright 1992
Institute for domestic Tranquility